Norbit's (OB:NORBT) Shareholders Will Receive A Bigger Dividend Than Last Year

Norbit ASA's (OB:NORBT) dividend will be increasing from last year's payment of the same period to NOK3.00 on 16th of May. This will take the dividend yield to an attractive 2.7%, providing a nice boost to shareholder returns.

View our latest analysis for Norbit

Norbit's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Norbit's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 110.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 17% by next year, which is in a pretty sustainable range.

Norbit Doesn't Have A Long Payment History

It is great to see that Norbit has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2020, the annual payment back then was NOK0.30, compared to the most recent full-year payment of NOK3.00. This implies that the company grew its distributions at a yearly rate of about 58% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Norbit has been growing its earnings per share at 21% a year over the past five years. Norbit is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Norbit Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Norbit stock. Is Norbit not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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